The Million Dollar Way (The Bakken Oil Blog): 06/13/18

Wednesday, June 13, 2018

Random Update Of Bakken Well EURs -- CLR's May, 2018, Corporate Presentation

For newbies: this has nothing to do with investing. This has everything to do with the potential of the Bakken. Jane Nielson probably knows more.

EUR type curves, for CLR:

2011: 430 mboe
2014: 603 mboe
2015: 800 mboe
2017: 980 mboe
2018: 1,100 mboe ($7.9 million)
"all optimized completions" now exceed the 1,100 mboe EUR type curve

Production:

1Q18, 161K boepd; up 48% from 1Q1

Tea Leaves Suggest Price Of Oil To Rise -- June 13, 2018 -- Venezuela Imports Oil To Meet Refinery Demands

Updates

June 25, 2018: still very bullish for oil even after OPEC+ announcement. Saudi production from another source (link lost) -- note: this is total production, not exports. Women given the right to drive should increase local demand at least to some extent.

Original Post

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

Disclaimer: it's a fool's errand to predict oil prices, including the trend.

Note: this could all be greatly affected if Russia and Saudi Arabia agree to increase production. We will know more by the end of June / July. "Those" tea leaves suggest Russia and OPEC will raise production using the excuse that loss of production in Iraq, Iran, Venezuela and global demand forecasts for 2019 necessitates such action.

Sixteen reasons:

Re-posting:

WTI: the tea leaves suggest the price of WTI will continue to rise -- let's stir the tea -- (note to newbies: "tea leaves" have a mix of fact and opinion and it's not necessarily easy to tell them apart; tea leaves look alike) --

a graphic earlier today suggested Saudi Arabia "spare capacity" forecast to shrink significantly in 2019

there's a story over at oilprice.com suggesting US shale oil won't be able to fill the gap

the Permian pipeline shortage won't be resolved before 2019

the Trans Mountain Pipeline expansion project won't be completed this year (if ever)

not even the height of summer driving season, and US gasoline demand hits a new record

refiners are operating at 95.7% capacity and having trouble keeping up with distillate fuel demands

distillate fuel reserves in the US hit an all-time (if not an all-time low, very close; certainly appeared that way on the graph; needs to be fact-checked)

China recently shut down new solar installations, suggesting they need more fossil fuel sooner

Venezuela may import heavy oil to meet refining needs (see below)

Iraq's instability may affect production

Iran's sanctions will cause greater shortfall than some pundits suggest

the chairman of the "US Fed" said their will be four rate hikes this year, partly because "they" expect the price of oil to increase by the end of the year, causing inflationary pressure on the economy

Now, some background stories.

First a graphic: US gasoline demand sets a record --

Venezuela: may import oil for the first time in its history to meet refining needs. [Later: it's now announced -- Venezuela is importing oil to meet refinery demands.]

the state-run oil company has drawn up plans to import 57,000 bopd to meet demands of its largest refinery
would need to be heavy oil
Russian and Chinese customers probably putting the "screws" to PDVSA
the refinery's capacity: 1.3 million bopd; breaking down; not being maintained
no comment by Reuters suggesting how this all came about

Shale oil can't fill the gap anticipated in 2019 -- IEA: from oilprice -- actually IEA didn't say that explicitly -- there were a lot of qualifiers -- Nick Cunningham seems to be putting words into the IEA statement -- I didn't see anything in the article that alarmed me.

Spare capacity: posted earlier; I'm not concerned with this data, either.

Active Rigs Up To 63 In North Dakota; Tea Leaves Suggest WTI Will Continue To Rise -- June 13, 2018

WTI: the tea leaves suggest the price of WTI will continue to rise -- let's stir the tea -- (note to newbies: "tea leaves" have a mix of fact and opinion and it's not necessarily easy to tell them apart; tea leaves look alike) --

a graphic earlier today suggested Saudi Arabia "spare capacity" forecast to shrink significantly in 2019
there's a story over at oilprice.com suggesting US shale oil won't be able to fill the gap
the Permian pipeline shortage won't be resolved before 2019
the Trans Mountain Pipeline expansion project won't be completed this year (if ever)
not even the height of summer driving season, and US gasoline demand hits a new record
refiners are operating at 95.7% capacity and having trouble keeping up with distillate fuel demands
distillate fuel reserves in the US hit an all-time (if not an all-time low, very close; certainly appeared that way on the graph; needs to be fact-checked)
China recently shut down new solar installations, suggesting they need more fossil fuel sooner
Venezuela may import heavy oil to meet refining needs
Iraq's instability may affect production
Iran's sanctions will cause greater shortfall than some pundits suggest
the chairman of the "US Fed" said their will be four rate hikes this year, partly because "they" expect the price of oil to increase by the end of the year, causing inflationary pressure on the economy

Politics: I love how every politico -- from the far left to the far right -- has advice for President Trump on North Korea. Six months ago they all said "it" couldn't be done. Now that "it's" been done -- North Korea agreeing to complete denuclearize -- the politicos have advice for President Trump. I was most negatively impressed by House Speaker Ryan by his remarks today; glad to see him stepping down as House Speaker.

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Back to the Bakken

Active rigs:

$66.64↑	6/13/2018	06/13/2017	06/13/2016	06/13/2015	06/13/2014
Active Rigs	63	56	28	75	185

Five new permits:

Operator: Hess
Field: Capa (Williams)
Comments: Hess has permits for a 5-well CA-Ferguson Smith pad in SESE 19-155-95

And that was all.

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For The Archives

Gasoline Demand In The US Hits An All-Time Record -- June 13, 2018

From the EIA, thousand bbls gasoline/day:

Back of envelope calculations:

One year ago:

2nd week, June, 2017, one year ago: 9,269
peak, summer, 2017, one year ago: 9,846
(9846-9269)/9269 = 6.2%

Extrapolating forward:

2nd week, June, 2018, most recent data: 9,879
9,879 * 1.062 = 10,491 thousands bbls gasoline/day

Keeping North Dakota Great -- June 13, 2018 -- Air Quality Permit Approved For Davis Refinery, Southwest North Dakota

Link at Bismarck Tribune.

The department issued the permit to Meridian Energy to construct the Davis Refinery near Belfield after reviewing more than 10,000 public comments.

It would be interesting to get an analysis of the number of:

"robo" comments
form letters via e-mail; number with relevant comments
out-of-state comments
non-ND-resident comments

Remember this from an earlier post?

New refinery: Meridian's Belfield refinery, 45-day comment period

more than 11,000 comments
of those, 10,068 were form letters via e-mail; none with relevant comments
of all comments, 22% received from the west coast, specifically Oregon, Washington, and California
1.8% of the comments were from North Dakota respondents

It's interesting that both the the "refinery permit" and the "air quality permit" had an almost equal number of submissions.

For an update of refinery projects in North Dakota, see this February, 2018, post.

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GDP Now

Latest forecast: 4.6 percent — June 8, 2018.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 4.6 percent on June 8, up from 4.5 percent on June 6.

After this morning's wholesale trade release from the U.S. Census Bureau, the nowcast of the contribution of inventory investment to second-quarter real GDP growth increased from 0.99 percentage points to 1.06 percentage points.

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"Fed Rate"

The "Fed" raises "rate" to 2.5%. Two more rate increases this year would bring the "Fed rate" to 3.0%.

History of US recessions.

History of "Fed rates."

Past decade:

Multi-decade:

An Interesting Graphic But Hardly Relevant -- June 13, 2018

From John Kemp today:

The graph above will help put any production increase by Russia and Saudi Arabia in perspective.

If push comes to shove, my hunch is that US shale could respond quickly.

The problem: the mix of the different kinds of oil.

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US Open

A Note to the Granddaughters

With the US Open in Shinnecock Hills, I'm reminded of my wonderful days in a bedroom community, suburb of NYC, many decades ago, Westfield, NJ.

During that summer I was able to get into Manhattan only a couple of times. I never got out to Long Island.

Shinnecock is at the far east end of Long Island; it must be a beautiful setting. I can only imagine.

When I was in my "Great Gatsby" phase I spent a lot of time studying the map of Long Island. East Egg and West Egg are much, much closer to NYC, near the west end of Long Island.

And of all things, I never realized Belmont Park was in the same general area.

Least Livable Cities In The US -- USA Today -- June 13, 2018

Link here. A most interesting list put together by USA -- the least livable cities in the US.

Not on the list:

Portland, OR
any city in Texas
any city in North Dakota, South Dakota, Idaho, Montana, Minnesota, Iowa
any city in Oregon (surprising); Nebraska, Kansas, Wyoming
any city in Maine, New Hampshire, Vermont, Rhode Island
any city in North Carolina, Virginia, Kentucky

But:

two cities in Tennessee made the list
Chicago is not on the list
Ohio seems over-represented

Least livable cities:

1. Detroit (no surprise)
2. Flint, MI
3. St Louis, MO
4. Memphis, TN (I have heard this before; surprising; sad)
5. Cleveland, OH (no wonder LeBron wants to leave)
6. Wilmington, DE
7. Albany, GA
8. Springfield, MO
9. Baltimore, MD (surprised it's only #9)
10. Milwaukee, WI
11. Hartford, CT
12. Homestead, FL
13. Florence-Graham, CA (never even heard of it)(just north of Compton, south of Los Angeles)
14. San Bernardino, CA
15. Youngstown, OH
16. Rockford, IL
17. Pueblo, CO (really?) (only city in Colorado on the list; high poverty problem)
18. Gary, IN
19. Little Rock, AR
20. Compton, CA
21. Shreveport, LA
22. Charleston, WV
23. Daytona Beach, FL
24. Stockton, CA
25. Miami Beach, FL
26. Merced, CA
27. Oakland, CA
28. Springfield, MA
29. Dayton, OH
30. Trenton, NJ
31. Tucson, AZ (after recent visits, not surprised)
32. Fresno, CA
33. Canton, OH
34. Buffalo, NY
35. Toledo, OH
36.Knoxville, TN
37. Kalamazoo, MI
38. Tallahassee, FL
39. New Haven, CT
40. South Bend, IN
41. North Charleston, SC (we've lived there, or actually very close to this city)
42. Miami, FL
43. Syracuse, NY
44. Jackson, MS
45. Albuquerque, NM
46. Tacoma, WA
47. Atlanta, GA
48. Gainesville, FL
49. Salt Lake City, UT
50. Fort Smith, AR (never heard of it)

Refinery Operating Capacitiy -- An Observation -- June 13, 2018 -- Another Most Interesting Graphic

Earlier I posted another most interesting graphic.

Now, this graphic, again, from John Kemp:

Distillate Fuel -- An Observation -- June 13, 2018 -- Most Extraordinary Graphic

Just moments ago I posted this:

Weekly petroleum report, link here:

down a lot more than expected

down 4.14 million bbls

now at 432.4 million bbls

WTI immediately after report -- up 25 cents/bbl -- now at $66.54

refinery operating capacity way up: 95.7% -- highest I've seen in a long time

gasoline production crept up slightly; I use "10 million bbls/day" as the benchmark; most recent data, up to 10.5 million bbls/day

distillate fuel production crept up slightly; I use "5 million bbls/day" as the benchmark; most recent data, up to 5.1 million bbls/day

I thought that was a "positive" report regarding distillate fuel -- production actually crept up slightly, and was very slightly above my "benchmark."

But then this. This is an incredible graph. A huge thanks to John Kemp for spotting this:

I have opined many times that if I had but one metric to follow to judge the health of the US economy, it would be amount of gasoline consumed.

Now, without question, I would argue that if one had but one metric to follow the industrial activity of the US, the one metric to use: distillate fuel consumed.

The Bakken is booming again. The Permian is on fire. And I often forget to mention it bu the Eagle Ford is doing very, very well.

In addition, all the new petrochemical activity and new construction going up along the Texas - Louisiana gulf coast.

This "stuff" all uses a lot of diesel fuel.

From the EIA:

And look at this. John Kemp predicted this seven months ago:

Can anyone say, "synchronized global economy"?

I wrote that last line before I read the John Kemp article. Here are the last three paragraphs of that article:

While some distillate fuel oil is still used for heating, most is used in the high-powered engines used to move freight and industrial machinery so demand is closely linked to the business cycle and trade.

With nearly all regions of the global economy experiencing a synchronized economic expansion and world trade volumes are growing at the fastest rate for six years, distillate demand is growing rapidly.

The global economic expansion and trade upturn are expected to continue boosting demand even further in 2018/19 unless there is a major macroeconomic, financial or trade shock.

Crude Oil Inventories Down More Than Expected -- June 13, 2018

NASDAQ: hits another all-time high. Whoo-hoo!

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or think you may have read here.

Busy day in Bismarck? Data for wells coming off confidential list today not yet posted.

Weekly petroleum report, link here:

down a lot more than expected

down 4.14 million bbls
now at 432.4 million bbls
WTI immediately after report -- up 25 cents/bbl -- now at $66.54
refinery operating capacity way up: 95.7% -- highest I've seen in a long time
gasoline production crept up slightly; I use "10 million bbls/day" as the benchmark; most recent data, up to 10.5 million bbls/day
distillate fuel production crept up slightly; I use "5 million bbls/day" as the benchmark; most recent data, up to 5.1 million bbls/day

Netflix: lots of talk about Netflix this morning on Fox Business News --

Netflix has unique ability to stream content to individuals
on a personal level: our daughter / son-in-law watch almost no "television"
they subscribe to Netflix and a few other such outlets
Sophia only watches Netflix

when I come over to her house, I pick up the remote
press on the "Netflix" button
click on "Sophia" on the screen
up pops all the channels, series, and shows that are targeted specifically for Sophia
if I click on "Arianna," her older sister, a whole new set-up pops up
I then scroll through the channels, series, or shows, and Sophia points out what she wants to watch
and no ads

Netflix is really quite remarkable
"The Next Big Thing" began with Netflix many, many years ago

Sticky graphs: I post a lot of graphics on the blog, but recently this is the graphic that sticks in my mind -- this is a really, really remarkable graph and explains why Trump is turning away from the G7 and shifting to the east (China, Korea, Japan, Asia):

The Market And Energy Page, T+13 -- June 13, 2018

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here.

EW to hit 52-week high, and also appears to be an all-time high:

Making North America great again: it should be remembered that President Obama failed to get the World Cup to the US for both 2018 and 2022 despite a personal and compelling appeal. But, apparently ... well ... best left unsaid ...

Some Relief For The Permian Natural Gas Glut? Waha To Mexico -- June 13, 2018

Well, that was easy:

Floating storage of US shale oil "swamps" Europe -- from Reuters -- (estimates for the most part) --

The boom in U.S. shale shipments has outstripped OPEC’s production cuts and pushed millions of barrels into European waters, where more crude is being stored on ships than at any time in the last 18 months.
At a monthly average in May of 12.9 million barrels, or 26 percent of total global floating storage, Europe had more oil in floating storage than the Asia-Pacific region at 9.7 million.
In March-April, Europe’s share was 10 percent versus 40 percent in Asia-Pacific.
The monthly average share of oil in floating storage located in European – including the Mediterranean – in May outstripped volumes floating in Asia-Pacific for the first time since at least the beginning of 2015.

Global oil demand to remain strong in 2019 -- IEA -- link at WSJ.

report says demand will grow by 1.4 million bopd
this is IEA's first forecast for 2019
demand for 2019 will be on par with this year
a significant part of that growth will be driven by rising demand for petrochemicals

US crude oil inventories, weekly data: one link is here --

API report yesterday: an insignificant draw of 730,000 bbls

expectation by analysts: a draw of 2.744 million bbls

API: surprise build of gasoline inventories -- a build of 2.33 million bbls

analysts had expected a build of only 443,000 bbls
that's why your neighborhood service station dropped gasoline prices overnight (LOL)

EIA' s weekly petroleum report will be released later this morning

US crude oil production (same link as above):

US weekly production sets new record, I believe, up to 10.8 million bopd
Saudi Arabia increases production to 10 million bopd
Russia increased oil production to 11.1 million bopd